Treasury exchange traded funds (ETFs) are searching for direction after recovering from a sell-off earlier this month, but PIMCO’s Bill Gross is reportedly holding firm on his call that Treasury bonds hold little value.
Gross made waves recently when news broke that his PIMCO Total Return Fund had initiated a short position in U.S. government debt. It’s a bet that Treasury yields will rise and push bond prices lower.
However, the 20 bond dealers that trade with the Federal Reserve forecast yields on the benchmark 10-year note will hold below 4% for a third straight year for the rest of 2011, Bloomberg reported Monday.
“I could join the dealers and say the 10-year’s not going to go to 4%, so what am I left with?” Gross told Bloomberg. “I’m left with an under-yielding, less-than-inflation security. I have better choices. As a firm we’re not going to put up with it.”
PIMCO recently filed paperwork for an ETF version of Total Return Fund that would be managed by Gross. [PIMCO ETF Filing is ‘May Day’ for Mutual Funds: Strategist.]